Central bank policy making in competing payment systems
This paper analyzes the interaction between two payment systems. Administrators of both systems establish intraday credit interest fees, caps, and collateral requirements. Analysis of the model indicates that if a central bank does not take into account the effects that its policies have on its share of payment system transactions, then its efforts to contain risks associated with daylight overdrafts on its wire system will require a loss in its share of total transactions volume. If it does recognize the potential loss in its share of payments, then socially optimal policy instrument settings are unlikely to emerge. Copyright International Atlantic Economic Society 2000
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Volume (Year): 28 (2000)
Issue (Month): 2 (June)
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Charles M. Kahn & William Roberds, .
"Payment System Settlement and Bank Incentives,"
Center for Financial Institutions Working Papers
97-32, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Angelini, P., 1996. "Are Banks Risk-Averse? A Note on the Timing of Operations in the Interbank Market," Papers 266, Banca Italia - Servizio di Studi.
- E.J. Stevens, 1989. "Removing the hazard of Fedwire daylight overdrafts," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 2-10.
- R. Alton Gilbert, 1989. "Payments system risk: what is it and what will happen if we try to reduce it?," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 3-17.
- Craig Furfine & Jeff Stehm, 1996. "Analyzing alternative daylight credit policies in real-time gross settlement systems," Proceedings 516, Federal Reserve Bank of Chicago.
- Kopecky, Kenneth J. & VanHoose, David, 2004. "Bank capital requirements and the monetary transmission mechanism," Journal of Macroeconomics, Elsevier, vol. 26(3), pages 443-464, September.
- Dirk Schoenmaker & Peter M. Garber & D. F. I. Folkerts-Landau, 1996. "The Reform of Wholesale Payment Systems and its Impacton Financial Markets," IMF Working Papers 96/37, International Monetary Fund.
- Douglas D. Evanoff, 1988. "Daylight overdrafts: rationale and risks," Economic Perspectives, Federal Reserve Bank of Chicago, issue May, pages 18-29.
- C. H. Furfine, 1999. "Interbank exposures: quantifying the risk of contagion," BIS Working Papers 70, Bank for International Settlements.
- Craig Furfine, 1999. "Interbank exposures: quantifying the risk of contagion," Proceedings 633, Federal Reserve Bank of Chicago.
- Sujit Chakravorti, 1996. "Analysis of systemic risk in the payments system," Financial Industry Studies Working Paper 96-2, Federal Reserve Bank of Dallas.
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